Chairman of CSRC: ‘Reform dividend’ a strong driving force for China’s capital market

By Xu Zhifeng from People’s Daily

BEIJING: The latest round of stock market rally since last July reflects optimistic expectations for China’s “reform dividend” and is also a result of the unfolding of previous government policies, said Xiao Gang, chairman of the China Securities Regulatory Commission (CSRC), on Tuesday.

The “Shenzhen-Hong Kong Stock Connect program” is expected to be launched during the second half of this year, disclosed Xiao when attending an exclusive interview with the People’s Daily on the sideline of the ongoing two sessions.

Xiao further explained that various measures launched by the central government were aimed at deepening reforms in a comprehensive way and have created expectations that have boosted investors’ confidence. This has greatly promoted the stock market. Xiao indicated that the reform dividend will become the strongest driving force in China’s capital market.

Besides, it cannot be denied that leveraging has also played an important role in pushing stocks higher. Statistics show that capital flowing into stock accounts from banking accounts, net flows via the Shanghai-Hong Kong Stock Connect program and other channels have all substantially increased. In the meanwhile, rapid growth in margin trading has also provided a large amount of new funding to support the market.

Xiao believes that the Shanghai-Hong Kong Stock Connect program is running smoothly now and has achieved its anticipated goal. The CSRC is now actively studying specific plans for the Shenzhen-Hong Kong Stock Connect program and this scheme is expected to be launched in the second half.

The chairman said the commission’s supervision department has been doing research on registration system reforms, and a preliminary scheme pertaining to registration has already been formed and the government is devoted to formulating specific implementation plan.

The actual implementation of the registration system will come after the revisions to the Securities Law, which is now under active promotion.

The CSRC is now vigorously promoting a regulatory transformation focused on streamlining administration and instituting decentralization. Xiao said the CSRC has cut about half of its administrative examination and approval items over the past two years. The CSRC plans to cancel all non-administrative licensing items this year.